Chinese Digital Migration and Resold Lamborghinis on A Blockchain

Off the Blocks | Vol 95, November 26, 2019

At Proteum, we partner with entrepreneurs to develop and deploy innovative products and solutions built with blockchain technology - advising them on building sustainable companies in a rapidly changing investment, regulatory and tech landscape.

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Recently, the Chinese premier, Xi Jinping, President of the People’s Republic of China and General Secretary of the Communist Party of China, said that the country needs to “seize the opportunity” afforded by blockchain technology. He added that China “… [must] clarify the main direction, increase investment, focus on a number of key core technologies, and accelerate the development of blockchain technology and industrial innovation.” This has, of course, led to a wide range of speculation on what it means for the world and the trajectory of both public and private blockchains.

The below commentary first appeared on CNBC and provides a good primer for context and the trajectory of the digital currencies and provides a perspective from the East.

The Good, The Bad And The Ugly Of A Chinese State-backed Digital Currency

As investors and technologists worry that the U.S. is falling behind in the race for dominance in blockchain, Beijing is trying to get ahead.

In a bear market for crypto we make friends; in a bull market we make money.

- Rae Deng, founding partner of Du Capital, a crypto investment firm

Deng said at CNBC’s East Tech West conference in the Nansha district of Guangzhou, China she sees another flourishing crypto scene coming, with more Chinese investment striding to the market after Beijing suddenly announced plans to embrace blockchain technology.

China is eyeing for a thorough digital migration. The policy signal will definitely bring a lot of incremental capital into the market.

She argued that Beijing’s public support will drive “traditional money” – corporate investment in Chinese traditional sectors — to become a big player. These investors previously shied away from the crypto market due to its sensitive status. Initial coin offerings (ICO) have been banned in China since 2017.

The magnitude and appetite of the traditional money will definitely change the status quo of the crypto community. That’s a total game changer.

China’s Blockchain Opportunity

In late October, the global crypto market surged after Chinese President Xi Jinping said the country should “seize the opportunity” blockchain technology presents.

The price of bitcoin briefly soared above $10,000 following Xi’s remarks. That pop was mirrored by similar spikes in the prices of more than a hundred Chinese stocks with blockchain exposure as well as a bunch of other cryptocurrencies.

While Beijing’s unexpected move came after Facebook announced its Libra cryptocurrency project in June, the policy change did not happen overnight, according Edith Yeung, managing partner at Proof of Capital, a blockchain-focused venture capital fund.

They have been working on and studying this for the last 5 years so this is not just ‘because of Libra therefore we do this’.

- Edith Yeung, Proof of Capital

China is moving full speed ahead while Facebook defends the cryptocurrency project against skeptical regulators. The social media giant has also seen many key payment partners, including Mastercard, Stripe, Visa, PayPal, and eBay, pull out of the project.

Industry experts predict that China could start rolling out its state-backed digital currency as early as the next two to three months. Government grants have been set up to help blockchain projects. For example, Guangzhou’s city government launched a 1 billion yuan (about $140 million) subsidy fund to support the development of the blockchain industry.

What’s The Rush?

China’s crypto initiatives are strategically significant. Blockchain is the technology field that China started to develop almost at the same time as other countries in the world. It’s hard for China to claim technological supremacy on fields like Internet Plus [China’s initiative on information technology] or artificial intelligence, but the blockchain technology would be a perfect fit for China’s technological dominance. It’s called ‘corner overtaking’ strategy in Chinese. Xiao told CNBC in Mandarin, indicating that the practice could be risky yet effective.

- Xiao Wunan, executive vice-chairman of the China-backed Asia Pacific Exchange and Co-operation Foundation (APECF).

To be sure, China’s digital currency might be very different from bitcoin or other tokens, which emphasize anonymity and decentralization. A state-issued digital currency would help the Chinese government fight issues like counterfeiting and product safety, but it also raises privacy concerns.

Internationalization Of The Yuan

First, a state-backed digital coin could “further facilitate the internationalization of yuan,” Du Capital’s Deng said. “It could run in parallel with the SWIFT [Society for Worldwide Interbank Financial Telecommunications] system and also the One Belt One Road initiative could be a carrier of that,” said Deng. A digital currency would also be able to tap into China’s massive, and largely cashless, payments system.

WeChat Pay has one billion transactions a day and footprints in 60 countries,” “China has the digital payment infrastructure of that scale and also domestically as China is moving towards a cashless society. It only makes sense for the central bank to adapt to that digital revolution reality.

- Rae Deng

China is the world’s largest e-commerce market, accounting for more than 50% of global transactions, according to a July report from the U.S. Department of Commerce’s International Trade Administration. In 2018, third-party mobile payment transaction volume hit 190.5 trillion yuan, according to China-based analytics firm iResearch. That figure amounts to about $28.78 trillion, based on the 2018 average exchange rate from the U.S. Internal Revenue Service.

Safer Food And Fewer Counterfeits

A state-backed digital currency could give regulators greater abilities to track money flows and product logistics within that massive e-commerce market. That would better equip them to tackle issues like counterfeit goods and product safety concerns, APECF’s Xiao explained.

The prime application would be in the agriculture sector because food security is one of the most crucial issues in China. Regulators would be able to track and identify origins of products. Also, if we apply the blockchain technology to Chinese e-commerce site, it would be much easier to address fake goods issues.

- Xiao Wunan

His comments come as China grapples with skyrocketing pork prices as African swine fever kills millions of hogs. “Similarly, it would be important to the healthcare sector too, as China may soon allow entry of Indian generic medicines in the country,” he added. “Traceability is the best cure for fake medicine.”

Enterprise Market

Experts also see the potential for a state-backed digital currency in China’s business-to-business (B2B) market. Currently, the country’s payment leaders – WeChat Pay and Alipay – focus on person-to-person or small payments, with little B2B exposure.

That B2B e-commerce market totaled 20.5 trillion yuan ($3.07 trillion) in 2017, according to statistics site China Internet Watch.

Blockchains have a huge potential to reduce cycle time in business transactions. Adding B2B payment into the blockchain transaction in a strong global currency would have a big impact in accelerating B2B [activities]. You could have the first Chinese B2B payment infrastructure that could be very, very large.

- Paul Brody, head of blockchain at Ernst & Young

Concerns About Fraud And A Cryptobubble

But as cash floods into the latest crypto boom, concerns about fast-rising valuations and potential fraud also crop up.

“I hope we will avoid repeating some of the mistakes here in China that happened in the rest of the world,” said Brody.

Cryptocurrencies hit staggering highs toward the end of 2017 and the beginning of 2018, only to plunge to a fraction of those levels. Bitcoin has recently been seen trading around $8,000, far below its all-time high of nearly $20,000 in late 2017.

“Seventy-five percent of the companies in the [previous] ICO boom never produced any product. Most of them never got auditors and that’s why we got a lot of the fraud,” he told CNBC.

Valuations of Chinese crypto start-ups and projects are surging, making it harder for potential investors to negotiate.

“Some of the companies we spoke to immediately raised their valuations by more than 50% shortly after Xi’s speech,” Du Capital’s Deng said. “It has become harder for us to get deals at reasonable valuations because competition is heated.”

“I think there will be bubbles for sure,” she added.


Now some significant news from the world this week:

  1. Travel | German Airline Hahn Air Issues First Blockchain-based Tickets: German airline Hahn Air, which offers scheduled and charter flights within Europe, announced on Monday it has issued the first airline tickets enabled by blockchain technology, in partnership with Winding Tree, an open-source travel distribution platform. Hahn Air on Monday flew passengers holding blockchain-powered tickets on its scheduled flight from Dusseldorf to Luxembourg. Hahn Air is able to list inventory, manage the reservation requests, and receive payments once the booking process is complete. As a mode of payment, the airline accepts cash, credit card, or cryptocurrency, either the lif token or ether. [… Read More on Reuters]

  2. India | Binance Enters Indian Market With Acquisition of Crypto Exchange WazirX: Binance, the top crypto exchange by trading volume, announced the news but did not provide details of the deal. The company's entry into India might at first glance seem surprising, with the local crypto industry having been greatly disrupted by a ban on banking services for crypto firms instigated by the nation's central bank in April 2018. Since then a number of local exchanges, including Koinex and Zebpay, have been forced to close, with the remainder moving to survive on crypto-to-crypto trading, and avoiding the fiat system. That's a strategy employed by WazirX, which launched earlier this year offering crypto-to-crypto and peer-to-peer trades. Binance, however, has a way around the banking issue, having launched Indian rupees on its Binance Fiat Gateway in recent weeks. Now it says users of WazirX will soon be able to buy the tether (USDT) stablecoin with rupees via WazirX and use USDT to trade any cryptocurrency offered by Binance. [… Read More on Coindesk]

  3. Storage | Blockchain-based Storage Service Takes on Amazon AWS: Storj Labs, which operates a beta storage service for developers, businesses and consumers, initially launched the Tardigrade Decentralized Cloud Storage Service in August. Today, it announced its Beta 2 release and pricing, taking aim at Amazon's AWS S3 cloud service with what it says is a more cost-effective and resilient approach. The Tardigrade storage service claims 99.97% availability and said its prices are less than half the starting prices of legacy cloud storage providers. Tardigrade breaks up a file into 30 pieces that are stored across 80 drives from a pool of 3,000 distributed throughout any of 183 different countries or territories. Storj's Tardigrade service is fault-tolerant because the hard drives are located throughout the world and data is stored in a way similar to a RAID configuration in a traditional storage server – redundancy is built into the scheme. […Read More on ComputerWorld]

  4. Enterprise | Enterprise Blockchain Adoption Hinges On Use Case Fit: As technology matures and hurdles toward adoption clear, industry watchers are expecting blockchain to spend at least another three years stuck in the experimentation phase. Cultural shifts aside, the success of blockchain application in the enterprise depends on alignment between the context of the problem at hand, the capabilities of the specific technology and the deployment of the resources would require. Failing to balance these three elements means a mismatch between the technology and the problem it's suited to solve, a disconnect that can lead to further sunken costs and friction during adoption. Considering blockchain as the potential solution to a problem should rely on a combination of the company's business requirements, appetite for risk and approach to innovation. [… Read More on CIO Dive]

  5. Business | Waves and the Tricky Task of Being a Russian Crypto Brand: When Vostok, the enterprise branch of Waves, a blockchain startup, launched last year, it was proud to showcase its Russian connections. It debuted with the news of a partnership with Rostec, a state-owned mega-corporation with ties to many hi-tech industries. But the Russian links have been a double-edged sword. While the Rostec tie-up earns legitimacy at home, it complicates things abroad. Rostec was sanctioned by the U.S. in 2014 following Russia’s annexation of Crimea and the war in Ukraine. Registered in Switzerland, Waves is striving to become a key blockchain provider for the Russian state. Based in Moscow, in a large office in the middle of a hipster office cluster, Waves is walking a fine line between being friendly with Russia’s state-controlled corporations (many of which are sanctioned by the U.S. and Europe) and building a positive image for the global market. […Read More on Coindesk]

The Final Word | Lamborghini Uses Blockchain to Authenticate Resold Cars

Image Credit

“When Lambo?” became a rallying cry for would-be cryptocurrency millionaires during the last Bitcoin bull run; now the Italian supercar manufacturer has itself embraced blockchain, using the technology to authenticate heritage vehicles.  Lamborghini announced it is using Salesforce Blockchain to secure and authenticate heritage Lamborghini cars. Resold Lamborghinis, writes the car manufacturer, go through 800 to 1000 certification checks at its headquarters in Sant'Agata Bolognese, Italy.  To create a history of the car, and to verify the authenticity of the parts and services, resold Lamborghinis must pass through a network of photographers, auction houses, dealerships, repair shops, newspapers, magazines, and other media sources—a process the manufacturer describes as “grueling.” Using Salesforce Blockchain, Lamborghini can create a trusted network of parties including technicians, repair shops, and dealerships. From the network, cars will have immutable records of service, restoration, and prior service. […Read More on Decrypt]


About Proteum
Proteum is a global blockchain investment and advisory firm that works with public, private and start-up companies to help them transition into the world of blockchains and decentralized applications. We help companies strategically build their ecosystem and unique capabilities so that they can own and control their future. ProteumX, our accelerator program, invests in and accelerates the time to market for startups and emerging ideas based on blockchain solutions.

www.proteum.io | info@proteum.io  | Twitter: @proteumio | ProteumX

Investing in Michael Jordan & Arts On The Blockchain

Off the Blocks | Vol 94, November 19, 2019

At Proteum, we partner with entrepreneurs to develop and deploy innovative products and solutions built with blockchain technology - advising them on building sustainable companies in a rapidly changing investment, regulatory and tech landscape.


Sports, Entertainment and Blockchain

Traveling through Europe the past week, it has become increasingly clear that digital technologies are permeating through the physical world at an increasingly higher rate. Nowhere is this more apparent than the world of sports where franchises are trying every play in the book to attract and retain fans across all sports, soccer, basketball, motorsports, tennis, etc. In this world of glamor and glitz, startups are starting to play a role in creating new fan experiences both on and off the field. One such company is Globatalent that is enabling franchises to find revenue opportunities outside of the sporting event itself. In Barcelona, I caught up with my friend, Sunil Bhardwaj, CEO, Globatalent for a fascinating conversation on how he sees the opportunity with sports, entertainment, and blockchain evolving in the next few years. Below is a guest post by Sunil and an introduction to his London based company.


Can you imagine a time when you could have invested in Michael Jordan before his debut in the NBA? 

Now I would be a billionaire, but what does it mean to invest in a future pro athlete? It means a lot of things, firstly that you can help a human to achieve their dreams. It means you can promote a society with values as sports promotes teammates, effort, selflessness, sacrifice, and consistency. Finally, it provides access to anyone to invest in an industry that right now they are not able to be a part of and since Globatalent appeared, this asset class was only available for private equity, venture capitalists and highly connected sports management companies.

Investing in athletes means that you can own a percentage of their future incomes during certain times of their career plus the benefits just explained before. Awesome, right?

The biggest sports management agencies in the world are handsomely paid for managing the careers of athletes. The 43 firms ranked by Forbes, have collectively negotiated an astonishing $51.7 billion in current professional athlete contracts, netting them $2.7 billion in maximum possible commissions, an increase of more than 45% from just five years ago. The top agency made $414M in fee commissions representing players in different sports.

On the other hand, an NCAA player is not allowed to get paid while universities are making millions on sponsoring and TV rights. The players themselves get a miserable grant that allows them to study. So, rather than staying for 4 years at the university, how can we not expect these players (who are willing to spend one or two years at the university) to turn pro and move as quickly as possible to play in the NBA, NFL, etc as they can make millions of dollars right away.

In Europe, young athletes don’t even think of going to the university if they are playing soccer in youth teams of top soccer clubs. They want to make all the effort to become professional and some at the age of sixteen are making more money than their parents do.

Most of these guys are under the control of managers agencies and some of them are very professional but others …. it is a different story and one that is at the heart of the genesis of Globatalent.

In the 21st century and in the era of digital collaboration Globatalent has come to change most of the old ways of this traditional industry of sport.

How?

By being able to help athletes and clubs to monetize their assets and therefore fans will be able to buy those assets and own a percentage of future income from them. However, we have added an extraordinary change as well by allowing fans to trade the assets from the athletes in our peer to peer exchange, adding liquidity to this process.

Therefore coming back the example of Michael Jordan I could buy assets from Michael Jordan that represent 1% of his income for the next 10 years and wait for my yearly payment or by selling my Michael Jordan asset in the Globatalent exchange. I can diversify my holding s by investing in another asset by another athlete. Note that these are all uncorrelated investment opportunities.

So being a global company, Globatalent provides a unique opportunity to involve fans from all over the globe to be part of this $3 Trillion business industry.

Find out more about Globatalent on their website and follow Sunil on Twitter @Sunilbhardwajca


Now some significant news from the world this week:

  1. Tokens | What the Ethereum "Transaction Flippening" Means: A “flippening” of sorts has happened on the Ethereum blockchain. Data revealed in a Coin Metrics report this week notes that, for the first time, the number of ERC-20 transactions has surpassed the number of transactions done in ETH itself. And as popular as those tokens are, they could be on the verge of giving way to the newer class of non-fungible tokens. The surge in transactions involving these types of smart-contract based tokens could be evidence that the Ethereum network itself is at last finding its footing with users, as evidenced by a variety of actual use cases.  [… Read More on Decrypt]

  2. EU | Exploring DLT and Blockchain for Alternative Finance – A Collection of Case Studies: The European Crowdfunding Network today published a first report on the use of DLT and blockchain for alternative finance during the global blockchain conference Convergence in Malaga. To understand the ways in which blockchain can most effectively be used for alternative finance the report clustered the results into the following use cases:

    • Online payment and identity services

    • Peer-to-peer investing and investment services

    • Financial democratization

    Read The Report Here

  3. Investing | Family Offices Finally Accept the Benefits of Investing in Bitcoin: Although Bitcoin’s volatility is well-documented, this has not stopped investors from adopting cryptocurrencies as a way of effecting a diversified investment strategy. Interestingly, the volatility narrative is somewhat losing its potency as Bitcoin slowly establishes stability. VanEck published a study that highlighted some of the factors that aided Bitcoin’s ascendancy as a viable investment product. One of these factors is the digital asset’s correlation to major market indices. In the study, VanEck noted that Bitcoin’s apparent disparity from established and emerging markets makes it a suitable portfolio diversification option. […Read More on CoinTelegraph]

  4. Banking | US Crypto Firms Will Soon Have Another Banking Option: Things may be about to get a little easier for firms working with cryptocurrency in the U.S. U.K.-based Cashaa, which describes itself as a banking service platform, is about to launch bank accounts for stateside crypto firms denominated in U.S. dollars. The new accounts will be open for applications from Nov. 25, with Cashaa saying they offer full banking features with access to all nations globally, bar sanctioned jurisdictions. Crypto industry companies in the U.S., as well as other jurisdictions, have traditionally struggled to find banks that will serve them. Even if they do, accounts may be closed without notice or warning over the perceived risks of cryptocurrencies. As such, there are relatively few crypto-friendly banks allowing firms to conduct normal daily business as other more traditional industries would expect as standard. [… Read More on CoinDesk]

  5. France | Parisian Blockchain Incubator The Garage Opens: The Garage, a Parisian blockchain incubator started by Starchain Capital’s Cyril Paglino, Dune Network’s Fabrice Le Fessant, and The Family’s Oussama Ammar, opened doors recently. It requests five percent equity—or five percent of capital—and in return promises to “do everything to make you succeed”, and offers “access to the best blockchain ecosystem in Europe.” The Garage promises to help its community with a variety of tasks, including product, engineering, press relations and marketing and gives entrepreneurs up to 60% equity in companies that it’s developed in-house. [… Read More on Decrypt]

The Final Word | Can Blockchain Help Inspire Artistic Creation?

The Malta AI & Blockchain Summit. Photos: Chris Sant Fournier
The Malta AI & Blockchain Summit. Photos: Chris Sant Fournier

The recent Malta AI & Blockchain Summit presented a number of topics involving the protection of personal data, the swift creation of transactions on a secure decentralised system as well as the capacity to revolutionise the way art is created.

‘Blockchain and the Arts’ was a segment that welcomed experts from across the globe and invited them to speak about their areas of expertise within the blockchain niche, linking it to the arts in the form of music, painting, graphic design and other areas of expression.

Young people create a lot, blockchain and timestamping within the blockchain can simplify the process.

Maria Carola, CMO, Guarda Wallet

[… Read More on The Times of Malta]


About Proteum
Proteum is a global blockchain investment and advisory firm that works with public, private and start-up companies to help them transition into the world of blockchains and decentralized applications. We help companies strategically build their ecosystem and unique capabilities so that they can own and control their future. ProteumX, our accelerator program, invests in and accelerates the time to market for startups and emerging ideas based on blockchain solutions.

www.proteum.io | info@proteum.io  | Twitter: @proteumio | ProteumX

Free Bitcoin, EU Single Market & Blockchain Ethics

Off the Blocks | Vol 93, November 12, 2019

At Proteum, we partner with entrepreneurs to develop and deploy innovative products and solutions built with blockchain technology - advising them on building sustainable companies in a rapidly changing investment, regulatory and tech landscape.

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From The Road In Europe

I am on the road in Spain talking about how to usher in some common standards across industries and countries when it comes to the adoption of blockchain technology. As I talk to people, I am hearing a lot about the EU Single Market. A recent report adopted by the European Economic and Social Committee highlighted the opportunities and some of the challenges associated with adopting blockchain across the continent. Notably, there is a big emphasis in alignment with UN Sustainable Development Goals (SDGs) - particularly related to

  • SDG #1 - No Poverty: Using cryptocurrencies for the unbanked population

  • SDG #3 - Good Health and Wellbeing: Sharing patient healthcare records more securely and efficiently

  • SDG #12, 14 & 15 - Sustainable production and consumption: Ensuring provenance throughout supply chains

The document also highlights some challenges to tackle which can be fodder for entrepreneurs. Some of these are highlighted below. The challenge regarding high energy consumption for “proof of work” chains seems to discourage the adoption of bitcoin and might be a red herring.

  • To unleash the potential of blockchain on the EU single market and for European societies, several issues must be addressed, where the current legal uncertainty is a priority. Some regulatory solutions for cryptocurrencies and ICOs exist; however, the legislative framework remains unclear regarding system design and in areas where blockchain technology is applied, resulting in a fragmented approach at the Member State level. Without a joint EU initiative for legal certainty and clarity across the EU, cross-border opportunities will be limited. Use cases and regulatory sandboxes for certain types of services and usage could be an initial stage to grasp the future legal requirements. The EU experience of developing complex, cross-border regulation and policy may be an advantage with regard to future regulation of blockchain.

  • Protecting privacy is key. The General Data Protection Regulation (GDPR)[1] was introduced to tackle the most urgent data issues. However, when the GDPR was prepared blockchain technology was mostly unknown, and thus the potential tensions between the GDPR and blockchain need to be reviewed. The EESC calls on the EC to examine the GDPR, and propose revisions and further guidance on the relationship between the GDPR and blockchain.

  • The legal distinction between anonymized and pseudonymized data concerns the categorization of personal data. Pseudonymous data still allows for some form of re-identification (even indirect and remote), while anonymous data cannot be re-identified. While in permissioned blockchain, pseudonymization is considered as a solution for the relations facilitated by blockchain technology, anonymization is still a regulatory barrier for wider use of permissionless blockchain, which can be resolved through digital identity solutions embedded into the regulatory restrictions.

  • The proof-of-work consensus mechanism is highly energy-consuming. With the development of the alternative proof-of-stake consensus mechanism, this important environmental sustainability issue can be resolved. Solutions already exist which must be shared and fully applied.

  • Another technical challenge is interoperability with different blockchain platforms. Different blockchain may not be compatible due to the risk for parties that need to exchange data. Another concern is the compatibility between blockchain platforms and existing government systems, hindering governments switching from their existing platforms to blockchain-based interoperability. Ensuring interoperability should be a priority in the near future for blockchain developers to enable mass adoption.

  • The take-up rate relies on adoption by the diverse forms of enterprises, with SMEs being the majority in the EU. Today, transaction costs are in many cases prohibitive, making technical and consultative services out of reach for SMEs. Supporting the creation of new BC networks such as cooperatives is crucial to ensure fair access for SMEs and other smaller entities, allowing for improved democratic governance.

  • It is critical to fully understand and review how blockchain technology impacts consumer protection and rights. Clarity is needed on the relationships between, for example, confidentiality and privacy enforced by legislation (e.g. EU data protection legislation), regulation (client confidentiality) or contract (commercial confidentiality).

    Download and read the full report here.


Now some significant news from the world this week:

  1. Supply Chain | Coca-Cola Supply Chain Firm Expands Blockchain Effort to 70 Partners: Coke One North America (CONA) says its pilot project with software provider SAP is now set to be expanded from two to 70 of the manufacturers that deliver the 160,000 bottles Coca-Cola shops daily. The blockchain project promises to improve distribution for the participants, as all manufacturers can access a permissioned blockchain containing each others’ orders, capabilities, and requirements. For example, if a bottle maker is short of stock for a looming order, the network quickly provides options for filling the shortfall.

    There are a number of transactions that are cross-companies and multi-party that are inefficient, they go through intermediaries, they are very slow and we felt that we could improve this and save some money.

    Andrei Semenov, Senior Manager at Coke One North America

    […Read More on Coindesk]

  2. Payments | Blockchain in Payments Report: The world today is hyperconnected. With nearly 55% of the world’s population online, it’s never been easier for people to connect, engage with one another and share what’s on their mind. While this ability to exchange information has become customary, the ability to exchange value remains complex, unreliable and expensive. The second annual Blockchain in Payments Report examines how payment service providers use or plan to use blockchain technology and digital assets to overcome these challenges and change the way the world moves money. This year’s findings reveal the widespread adoption of blockchain-based payments by financial service providers. This strong adoption signals that both customers and providers have proven the value and feasibility of blockchain technology. Moreover, trust has been won. To further fuel innovation and increase adoption speed, factors including simplified implementation and regulatory clarity are necessary. These factors are highly likely to be met over the next 24 months given the competitive drive exhibited by survey respondents and the collaborative efforts of providers and regulators. […Get The Report on Ripple]

  3. Banking | Tencent to Build Virtual Bank After Hong Kong Regulator Approves License: Chinese internet giant Tencent is set to open a blockchain-based virtual bank after the Hong Kong Securities and Futures Commission (SFC) approved a new license. The SFC has granted virtual bank licences to 12 entities so far. On the list is Infinium Limited, a joint venture between Tencent, Industrial and Commerce Bank of China (ICBC) and other two Hong Kong-based institutional investors. Tencent renamed Infinium to Fusion Bank in July after it received the license in May.  The SFC published details about its new licensing system to regulate virtual asset transactions on Wednesday, creating a similar framework to the one overseeing securities brokers. [… Read More on Coindesk]

  4. India | Tamil Nadu to Present Policies Focused on Blockchain and AI Ethics: The southernmost territory of the Indian subcontinent, Tamil Nadu, is gearing up to frame out a state-level policy for two globally evolving and celebrated new-age technologies, including blockchain and Artificial Intelligence that are distorting public policy and governance. The officials have revealed that the policy is likely to be released in a timeframe of eight to ten days as the necessary approvals are achieved from the authorities. Tamil Nadu has focused its AI and blockchain policies to outline the measures which will guide the government in aiding the development of the two fast-evolving technologies primarily for service dispatch and resolution of governance problems. [… Read More on CryptoNewsZ]

    We are working on separate policies on blockchain and AI. The AI policy is going to be perhaps the world’s first policy addressing safe and ethical use of AI.

    - Santosh Misra, CEO of TN e-Governance Agency (TNeGA)

  5. E-Commerce: Alibaba Partners with Lolli to Allow US Shoppers Earn ‘Free Bitcoin’: Chinese e-commerce giant Alibaba has partnered with Bitcoin (BTC) rewards shopping app Lolli, enabling its shoppers to earn 5% back in Bitcoin. Alibaba customers can now get Satoshis (sats), the smallest unit of Bitcoin currency, worth 0.00000001 BTC, when shopping “thousands of items online,” Lolli says. The new program will only be available for purchases in the United States. Aubrey Strobel, Lolli’s head of communications, reportedly claimed that residents in China will not be able to participate, and products would be shipped from China to U.S. users. [… Read More on CoinTelegraph]

The Final Word | Chinese Media Calls Blockchain “A Breaking Point” As Smart Cities Go Live

Image Credit

Regardless of the spread of cryptocurrency speculation, China is clearly enthused about the prospects of blockchain technology—for the time being. Over the last week, local governments in China have tapped into official enthusiasm for blockchain with a plethora of initiatives. According to the Xinhua News Agency (via Global Times), China has created an blockchain-based identification system for its cities. Developed by three institutes in Shijiazhuang city, the system will purportedly roll out nationwide, with each city eligible to apply for their own unique ID code since Sunday. This code will link cities within the ID system, enabling data sharing and interconnectivity between provinces. [… Read More on DeCrypt]

About Proteum
Proteum is a global blockchain investment and advisory firm that works with public, private and start-up companies to help them transition into the world of blockchains and decentralized applications. We help companies strategically build their ecosystem and unique capabilities so that they can own and control their future. ProteumX, our accelerator program, invests in and accelerates the time to market for startups and emerging ideas based on blockchain solutions.

www.proteum.io | info@proteum.io  | Twitter: @proteumio | ProteumX

On Governments, Invoicing Standards and Interoperability

Off the Blocks | Vol 92, November 5, 2019

At Proteum, we partner with entrepreneurs to develop and deploy innovative products and solutions built with blockchain technology - advising them on building sustainable companies in a rapidly changing investment, regulatory and tech landscape.

Share Off the Blocks | Proteum Weekly Newsletter


Crypto, Blockchain, and Governments

Governments are often looked upon as laggards when it comes to the adoption of novel ideas, technologies or ways of conducting its business. And rightly so, without proper vetting, it would be harakiri to disrupt the lives of so many people who depend on government services. Unfortunately, this is also an excuse for political forces to hide behind the scenes and do nothing. When it comes to blockchain, the attitude from governments has been mixed: from outright love to a cautious progression to a knee jerk banning of blockchain and cryptocurrencies.

Last week, the Chinese government went all-in into its push towards the adoption of blockchain technology. In order to help public officials and the general population understand the basics, the publicity department of the Central Committee of the Communist Party of China (CCPPD) released 25 instructional videos. The video series even includes information on Ethereum and Bitcoin. This should not be surprising - technology has obviously been a crucial part of China's plans for the future. Previously, The People’s Bank of China expressed concerns about the impact of Facebook’s Libra and cryptocurrencies in general and announced its own plans to launch a digital currency. Given the wide variety of applications, blockchain is as important a field as 5G and AI, other tech areas that seem to be increasingly complementary.

Governments ought to be playing a proactive role in understanding the implications of blockchain technology and the benefits it can provide for citizens. For one, it is about transparency and accountability of governance. Most governments have been notoriously slow in adopting digital records and management practices. An IBM study titled Building Trust in Government: Exploring the Potential of Blockchain , concluded that blockchain technology offers an opportunity to tackle a lack of trust and bureaucracy challenges. A significant percentage of ‘trailblazer’ governments are launching projects that apply blockchain to transform the way they provide services to their citizens.

Areas in which governments are starting to use blockchain include supply chain, health records, transportation, voting, energy, taxation, land titles, tokenizing welfare payments, digital currencies etc. Yet, in order to govern effectively, governments face many of the same challenges as enterprises, namely - how to manage interaction with citizens, utilize available information and adopt innovation. Each of these throws up its own set of frictions when applied to the real world.

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Traditionally, government budgets have not allocated resources to uncover innovation, creating a broad bureaucracy with little depth of talent and resources to drive adoption. This means that the opportunity now is to partner with private sector firms and create an ecosystem that allows for the assimilation of knowledge and position for growth within particular sectors. For example, Ripple recently partnered with TPBank, a commercial bank in Vietnam for cheaper, faster money transfer operations. The partnership is also creating an educational environment that can inform legislators on the challenges and opportunities they need to address while crafting laws specific to blockchain technology.

From the government perspective, blockchain needs to be seen as an infrastructural component and public-private partnerships will play a big role in bringing the benefits out into the open. Instead of reacting to every bit of cryptocurrency news in the media, governments need a mindset shift to see blockchain as a bedrock for trusted societies, commerce, and social services. Or as Dr. Kieran Brown, at Berkeley Research Group points out:

Do governments and regulators want to be architects of the future, or victims of it?


Now some significant news from the world this week:

  1. Fintech | Tencent to Lead Drafting of International Blockchain-Based Invoice Standards: WeChat parent company and Chinese internet giant Tencent has received the green light to draft blockchain-based invoice standards from China’s tax officials. Tencent’s blockchain invoice project was backed by multiple countries including the U.K., Switzerland, Sweden, and Brazil, as well as China’s State Administration of Taxation, at the ITU-T international meeting on e-voice standards Tuesday. Originally an anti-tax fraud initiative in Shenzhen, the company’s work on using blockchain tech to provide transparency in business reporting was announced last year. For the standards effort, Tencent is joined by The China Academy of Information and Communications Technology and the Shenzhen Taxation Bureau for the initial drafts, which Tencent and the related firms claim to be a step forward in realized blockchain business applications. [… Read More on Coindesk]

  2. MarTech | How Blockchain is Disrupting Digital Marketing and Where It's Headed:

    Blockchain marketing envisions an entirely new advertising and marketing environment, in which consumers are able to own and sell their data directly to marketers and advertisers. Built from the ground up to emphasize the relationship between brands and consumers,” Platz added, “blockchain marketing surpasses the middle-man.

    - Brian Platz, co-founder and co-CEO, Fluree

    This means circumventing platforms like Facebook and Instagram entirely, so there are greater trust and usability of consumer data. Blockchain is forming a direct data exchange between consumers and brands like never before. [… Read More on CMS Wire]

  3. Enterprise | In 2020, Businesses Likely To Shift Blockchain Focus To Integration, Interoperability: As blockchain ledgers proliferate in the corporate world, enterprises will need to ensure their flavor of distributed ledger can communicate with other platforms deployed by potential business partners. The result: interoperability is expected to take center stage next year. Interoperability also applies to public and private cloud infrastructures; some enterprises host their own blockchain technology while also outsourcing blockchain services from vendors, such as Amazon AWS and Microsoft Azure. Some blockchain vendors, such as IBM and Oracle, have developed APIs to pass data from legacy systems or from one blockchain to another, but not necessarily between different platforms. And, once an external data source is added to a blockchain ledger, ensuring messages are secure and data is accurate and not duplicated becomes yet another issue. [… Read More on Computer World]

  4. Rewards | Everipedia And Brave Join Forces To Win (And Reward) Your Attention: Everipedia and Brave are teaming up to help boost each others’ business. The blockchain-based digital encyclopedia Everipedia and privacy-focused web browser Brave announced on Thursday that two companies have entered into a “co-marketing agreement.” The move ties together two major blockchain brands that compete in different arenas of the Web 3.0 ecosystem. According to a joint press release, both Everipedia and Brave “boast millions of monthly active users.” Brave last month celebrated reaching 8 million monthly users, while Everipedia has seen its monthly visitors fluctuate between 1 and 2 million over the last 6 months, according to data from website analytics firm Similarweb. [… Read More on Decrypt]

  5. Tokenization | IBM, Intel, J.P. Morgan and Microsoft Join Others On New Blockchain Token Spec: A business consortium led by the Enterprise Ethereum Alliance said their new blockchain-based token specification can create a regulatory compliant digital currency for use in any number of scenarios. A new specification to allow businesses to create blockchain-based tokens for international trade and finance has been published – and businesses have already tested digital money based on it for cross border payments and settlement. The Token Taxonomy Framework v1.0 (TTF) was developed by more than two dozen businesses and overseen by the Enterprise Ethereum Alliance (EEA). Its goal: give businesses and developers access to a set of reusable, cross-industry components to create usable tokens. Creating a single set of definitions and terms will help blockchain platform interoperability – regardless of the distributed ledger platform on which it resides. [… Read More on Computer World]

The Final Word | Understanding The Risks Associated With Blockchain

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There are a variety of use-cases that have been identified as having the potential to enhance the function of financial markets empowered by blockchain. However, this new technology also comes with new risks. As operators of the infrastructure serving as the foundation for secure markets, we must not sacrifice the operational resilience and continuity of that infrastructure in pursuit of innovation.

A consistently popular cyber-attack vector focuses on the targeting and exploitation of the endpoint device with the objective to compromise user credentials or their private keys. Private keys, in the context of blockchain, serve as the identity and security credentials of the users of the distributed ledger supporting the ultimate anonymity of the ledger. Protecting the security of the private keys is critical for ensuring confidence in the blockchain. If a user loses its private key or it is stolen by a criminal through a cyber-attack, it cannot be recovered or worse, the user’s blockchain account is at risk. It is important that the implementation of a blockchain solution maintains a rigorous infrastructure supporting the custody, protection, and recoverability of its users’ private keys. […Read More on World Exchanges]

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About Proteum
Proteum is a global blockchain investment and advisory firm that works with public, private and start-up companies to help them transition into the world of blockchains and decentralized applications. We help companies strategically build their ecosystem and unique capabilities so that they can own and control their future. ProteumX, our accelerator program, invests in and accelerates the time to market for startups and emerging ideas based on blockchain solutions.

www.proteum.io | info@proteum.io  | Twitter: @proteumio | ProteumX

Miko @Evercoin, Real Estate & Paxos Equity Trades

Off the Blocks | Vol 91, October 29, 2019

At Proteum, we partner with entrepreneurs to develop and deploy innovative products and solutions built with blockchain technology - advising them on building sustainable companies in a rapidly changing investment, regulatory and tech landscape.

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In Conversation with Miko Matsumara, Cofounder, Evercoin

Last week, I sat down for a coffee with Miko Matsumara, co-founder of crypto exchange Evercoin and GP @Gumi Cryptos, a $30M VC fund focused on early-stage blockchain startups. The conversation was wide-ranging and fascinating as both of us have followed a non-linear career path. Here we talk about the crypto side of things and look at DeFi, capital markets and what it takes to build a steady company in the ever-shifting sands of the crypto economy.

Follow us on Twitter: Miko Matsumara, Aman Johar

Aman Johar (AJ): When I met you for a coffee the other day, you recounted Japanese love for photography and how it is about capturing the moment. How does that thought play with your life and career? 

Miko Matsumara (MM): In Japan, Photography is a Zen Art, much like archery (Kyūdō). Many things that appear "American" like golf and baseball have been transformed by Japanese culture in the same way. What distinguishes a Zen art is the pursuit of the "perfect moment". In Buddhism, we are to avoid craving, grasping and clinging. So this means that we may pursue perfection, but we should not expect perfection to last. This is expressed in the devotion Japanese people have to things like Cherry blossoms which peak and go away, as do all things. So with respect to the perfect moment, I try to balance the pursuit of the perfect moment with the ability to appreciate the perfect imperfection of every moment.

AJ: So, Evercoin is your latest startup. What are you really creating with it?  

MM: Evercoin is an incredibly deep product. It's the brainchild of Talip Ozturk, the creator of Hazelcast, an incredibly powerful in-memory database that powers things like the Apple online store. If you've ever bought something from Apple online, you've used Hazelcast. What's exquisite about Evercoin is that it makes exceedingly complex things look incredibly simple. What we are doing is bridging two extremely different worlds, the new world of self-sovereign data, identity and money and the old world of financial services. I encourage everyone to download a copy to their Android or IOS phone at http://evercoin.com because to use it is to understand how simple deep tech experiences can be. In a way, like the iPhone, it's a piece of Zen art in and of itself.

AJ: Was there an inflection point that made you jump into crypto? What was your journey of discovery? 

MM: Talip, my cofounder at Everoin dragged me into this space with his excitement and insistence that this technology was going to transform the world. I generally respect and listen to whatever he has to say, as he is one of the most well-informed people when it comes to understanding technology.

AJ: You are not only running a company, but you are also an investor. What are some of the other exciting companies/ideas that are crossing your desk? 

MM: From an infrastructure perspective we layer zero one and two solutions and also middleware solutions. But we are aware that "fat protocols" with their own tokens don't like to be encapsulated and so the value capture is different in this space, much more like traditional software where the layer closest to the user can catch the most value. In the application space, we like currently love Decentralized Finance (DeFi) and Gaming applications. I know these make me look shallow (playing games with money and money with games) but we do feel that we are in the early days of the space and that these kinds of applications are for the early adopters.

AJ: As a GP of a Japanese fund, Gumi Ventures, you have a realistic cross border appreciation. Where are the intersections and diversions between the US and Japanese markets when it comes to crypto/blockchain?

MM: The Japanese market is very bitcoin centric, but it's about to change. Japan has very liquid capital markets and an extremely strong but permissive regulatory environment. Because of this, we see great potential for projects such as Line LINK which is a new messenger based payment token. Once the payment token goes live we will see huge opportunities for consumer applications, especially games. 

AJ: On finance and capital markets, the mandatory question is - What's next for Libra? 

MM: Libra is a powerhouse and bigger than Facebook. Mark Zuckerberg said it well, which is that if Libra decides to move ahead before US regulatory approval, then Facebook will be forced to leave Libra. I think what people don’t understand is how big the remittance market is and how all Facebook has to do is set up a few country corridors and they will be a large financial services provider. One of those countries does not have to be the US, could be any reasonably sized country.

AJ: In the US though, the SEC thinks Telegrams TON is a security and they rejected another bitcoin ETF a couple weeks ago.

MM: I think the SEC has been correct in denying applications for ETF despite the objections of some of the commissioners. BTC has fragmented liquidity and as such even with its present size it is still subject to market manipulation. Of course, all capital markets are not only subject to but are most likely presently being "manipulated" and so strong hands tend to prevail in these economic conditions. This further exacerbates wealth inequality. We all had higher hopes in the crypto market but hope has largely been dashed by scam artists and bad actors who entered the space. What we will need for the next resurgence is for more projects to ship meaningful value into the hands of more users through the benefits of open source technology.

AJ: And its impact on scaling Evercoin globally? 

MM: The great thing about startup companies is that they are not heavy to lift. So small, nimble companies can out-execute in any environment, and lean companies can do great especially in down markets. Obviously, if bitcoin were priced at $50k USD everyone in the space would be making much more money. But for now, we are very satisfied with the opportunity to focus on quietly and patiently building world-class products, which is the best thing to do at such times.

AJ: Talking about disrupting fintech, what do you see the role of crypto in the next few years? Do you think the cost structures can be dismantled and replaced wholesale by a new system that enfranchises everyone? 

MM: I think if we are to have such a system, we need to improve custody management for everyone. This is because control over cryptographic keys is increasingly going to be the baseline for creating a new infrastructure not just for finance but for everything including self-sovereign data and identity as well. The new solution will essentially have a "double back door" model where the user is given the ability to control their sovereignty and should be protected from unlawful search and seizure from state and nonstate actors. But in cases such as AML and terrorist financing, drug, and human trafficking, enforcement authorities need the ability to use legally obtained warrants to be able to exercise legal rights to de-anonymize or de-pseudonymize users. Without such safeguards, we are in an existential fight between governments and individuals.

AJ: What's a book recommendation - not necessarily crypto/blockchain? 

MM: I recommend "The Book of Satoshi" and also "Bitcoin Billionaires" the first for knowledge and mindset and the second for entertainment.

Read | The Book of Satoshi

AJ: Finally, Keyless is a company both of us are familiar with. You are an investor, and I have known Andrea and helping him deploy the tech starting with our portfolio. What made you invest?

MM: Absolutely Andrea, the CEO and the team. If you're doing early-stage investment you have to pay a lot of attention to who you are investing in. This is a young but world-class team with incredible drive, vision, and smarts.


Now some significant news from the world this week:

  1. Equities | Paxos Launches Settlement Platform for Equity Securities After SEC Relief: Paxos Trust Company announced today that it is set to introduce its Paxos Settlement Service for a number of United States-listed equity securities. Paxos stated that it is moving forward with the launch of its blockchain-based settlement platform, having received no-action relief from the U.S. Securities and Exchange Commission (SEC). The SEC letter indicated that the agency will not take any action against Paxos, which means the company can now proceed with the roll-out of its settlement platform.  Two European banks, Credit Suisse and Société Générale, will be among the first to utilize the live application of the blockchain-enabled product for U.S. equities, where the two parties will be able to bilaterally settle securities trades directly with each other. […Read More on CoinTelegraph]

  2. Real Estate | Cryptocurrency And The Blockchain Could Revolutionize CRE. So Why Aren't We Using It? Blockchain-fueled investments promise to dramatically transform the commercial real estate market landscape, and stakeholders are starting to take notice. Blockchain technology unfreezes real estate equity, making it a more feasible investment option for those who need more liquidity in their portfolio. Much of its new technology is just beginning to break on to the real estate investment scene, where it could completely transform the way real estate is traded ⁠— and open the door for many who were previously locked out of the market. A survey by Deloitte finds a similar trend. Firms are slow to adopt the changes, but the firm's survey results show 53% of respondents say blockchain technology has become a top priority for them, which is a 10% increase over last year. [… Read More on Bisnow]

  3. Phones | What is a blockchain phone? What exactly is a blockchain phone? Each device varies in terms of tech and capabilities, but they're all designed to put a stronger emphasis on blockchain, crypto, and decentralized applications than your average iPhone or Android handset. The most common feature is enhanced security to protect your cryptocurrency and private keys, while some let you run a full bitcoin node or even mine crypto from your mobile device. Blockchain phones are available at a wide variety of price points, but as with anything, you get what you pay for with smartphones—so as all-round devices, the cheaper models won't be anywhere near as capable as the expensive flagship phones are. [… Read More on Decrypt]

  4. Strategy | China Seizes the Blockchain Opportunity. How Should the US Respond? The Chinese government is not in the habit of making speculative “what if” announcements. Typically, before anything about its plans goes public, a significant amount of preparation and thought has gone into it. So, although Xi Jinping’s passing statement about China needing to “seize the opportunity” posed by blockchain technology was thin on details, it’s unwise to assume nothing will come of it. In fact, as CoinDesk’s David Pan reported on Monday, there’s already a massive amount of blockchain development going on in China. How should the U.S. react to this? Definitely not with complacency. [… Read More on Coindesk]

  5. Trust | Blockchain is About Co-Evolution: In recent years, we have seen declining trust in major institutions that were the custodians of trust for so long. Two major global events have contributed to this ‘trust implosion’: the global banking crisis and the rise of Fintech. In the past, ordinary people were made to accept an asymmetric power balance. Their lives were made transparent to the ‘establishment’, while the inner workings of those institutions were kept hidden. The middlemen created a de facto monopoly of trust. That two-way mirror is being smashed. The contours of new trust paradigms are being created in different ways. We no longer need to place our confidence in declining and opaque authorities. Trust-enabling technology such as blockchain allows us to bypass the go-betweens, avoiding the risk of error, delay, bureaucracy and, yes, deception. [… Read More on Forbes]

The Final Word | China Wants Communist Party Members to Pledge Loyalty on Blockchain

China’s Communist Party (CPC) is taking its leader’s support for blockchain to heart. Following Xi Jinping’s bombshell speech last week urging his countrymen to “seize the opportunity” created by the technology, the CPC released a decentralized app (dapp) for members to attest their loyalty on a blockchain. According to a post from the CCP’s propaganda office on Saturday, the dapp, in literal translation called “Original Intentions Onchain,” allows members to pledge their allegiance to the party and store it on a blockchain, which can be shared and seen by others. The term “Original Intentions” is a specific phrase mentioned by Xi during his remarks at the 19th National Congress of the CPC in 2017, after which it became a significant propaganda and educational campaign for party members to stay committed to their party. [… Read More on Coindesk]


About Proteum
Proteum is a global blockchain investment and advisory firm that works with public, private and start-up companies to help them transition into the world of blockchains and decentralized applications. We help companies strategically build their ecosystem and unique capabilities so that they can own and control their future. ProteumX, our accelerator program, invests in and accelerates the time to market for startups and emerging ideas based on blockchain solutions.

www.proteum.io | info@proteum.io  | Twitter: @proteumio | ProteumX

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